Category: News This Week

Taxpayers’ Group Slams Kiwi Curbs on Flavors
Photo: Duh84bk – Dreamstime.com
New Zealand will enact flavor restrictions and ban vapor product advertising in November, reports the New Zealand Herald.
The country’s House of Representatives passed the Smokefree Environments and Regulated Products Vaping Amendment Bill on Aug. 5—just before the final sitting day in this term of government.
Associate Health Minister Jenny Salesa promised to regulate the industry in November 2018 but didn’t introduced the bill until this year. She described the legislation as the most significant change to the Smokefree Act.
The new law will:
Ban the sale of vaping products to those under the age of 18.
Prohibit advertising the products and encouraging people to buy them in-store.
Limit the sale of all flavors to specialist stores, including online retailers, with shops Like dairies, supermarkets and petrol stations restricted to mint, menthol and tobacco.
Allow specialty stores to continue offering loyalty points and discounts.
Ban vaping in cars with children.
Enable all retailers to display products in-store.
Provide a framework for regulations to be set where people can vape in or outside premises.
Introduce a safety system which would allow the Ministry of Health to recall products, suspend them and issue warnings.
Critics said the new rules are too restrictive and could prompt people using vaping as a smoking-cessation tool to turn back to cigarettes.
“The vaping regulations rushed through under urgency are an absolute boon for the tobacco industry,” said Jordan Williams, spokesman of the New Zealand Taxpayers’ Union. “Decreasing the availability of appealing alternatives to cigarettes will keep disproportionately poor New Zealanders on the durries, paying a massive price in excise tax and devastating health outcomes.
“The range of appealing flavors is one of the key attractors for smokers transitioning off cigarettes,” he said. “When someone walks into a convenience store and is denied access to flavored vape liquid but can still buy their favorite cigarette brand, they’re at risk of falling off the wagon. And a complete ban on advertising for vaping products will prevent these brands from appealing to smokers to make the switch,” said Williams.
August 7, 2020
KT&G Start Exports to Russia Under PMI Deal

Photo: KT&G
KT&G started exporting its Lil tobacco heating devices to Russia last month, according to The Korea Times. Earlier this year, KT&G and Philip Morris International (PMI) signed an agreement under which PMI would commercialize certain KT&G products outside of South Korea.
During the announcement of its second-quarter results, KT&G confirmed that KRW12.5 billion ($10.54 million) worth of e-cigarette devices were exported to Russia in July.
The partnership is calling for KT&G to export its tobacco heating devices and tobacco sticks worldwide through PMI’s global sales network.
The exports to Russia come as heat-not-burn (HNB) appears to be losing steam in South Korea, with category penetration decreasing for the second consecutive quarter. The rate stood at 13 percent at the end of last year but declined to 12.6 percent in the first quarter and 12.4 percent in the second quarter.
The company, however, said this does not mean a deadlock in HNB products’ growth, citing the expansion in overseas markets.
“From a future business standpoint, the overall heat-not-burn tobacco market is expected to grow,” a company spokesperson was quoted as saying. “When the new products are introduced, the market is bound to grow. While there would be some minor impact from governments’ policies and market events, there is no doubt about the growth trajectory.”
KT&G said conventional tobacco sales this year will likely exceed its annual goal set earlier as demand remains strong. In exports, the firm has already secured shipping volume destined for Middle Eastern markets in the second half of the year, while other overseas markets are showing signs of recovery from the impact of Covid-19.
KT&G reported KRW1.32 trillion in consolidated sales during the latest quarter, up 4.8 percent from a year earlier. But the operating profit contracted by 1.1 percent year-on-year to KRW394.7 billion, due to the decline in duty free sales.
Overseas tobacco sales increased by 14.1 percent to KRW286.4 billion, as its main export markets in the Middle East show solid recovery. The company expected growth will continue as its sales are increasing in Latin South America and Africa.
KT&G’s international ambitions were examined in-depth in Tobacco Reporter’s June 2020 issue.
August 7, 2020
Tant to Retire From Imperial Brands

Oliver Tant (Photo: Imperial Brands)
Imperial Brands Chief Financial Officer Oliver Tant will retire from the company once a successor is found, reports Reuters.
The move comes just a month after Stefan Bomhard, a former executive of car dealer Inchcape joined the cigarette maker as chief executive officer.
In May, Imperial Brands cut dividend for the first time since listing in 1996 as it looks to save cash amid the coronavirus pandemic and reduce its £14 billion ($18.31 billion) debt.
Imperial Brands is reportedly looking for an external replacement for Tant, who has been CFO since November 2013.
Imperial Brands reported revenue of £35.56 billion ($47.16 billion) in its fiscal year 2020, up from £31.59 billion in 2019. Its operating profit was £2.73 billion, compared with £2.2 billion the previous year. On an adjusted basis, the company’s revenue was £7.99 billion in 2020, down 0.1 percent from 2019. Adjusted operating profit was £3.53 billion, against £3.74 billion the previous year.
While benefiting from strong tobacco volumes, Imperial Brands said it suffered from a sub-optimal product and market mix in 2020. However, a more disciplined approach in next-generation products reduced second-half losses after a disappointing first six months, the company added.
August 7, 2020
Nat Sherman to Close Premium Cigar Business

The Entrance to the historical Nat Sherman Townhouse in Manhattan (Photo: Askoldsb | Dreamstime)
Nat Sherman will shut down its premium cigar businesses by the end of September.
The 90-year-old company will close both its wholesale cigar business and the company’s iconic New York City retail location known as the Nat Sherman Townhouse.
Altria Group, which purchased Nat Sherman in 2017, had wanted to sell the premium cigar business but reached no deal despite initial interest from buyers.
“We worked hard to successfully transition Nat Sherman International to a new home,” said Jessica Pierucki, general manager and managing director for Nat Sherman. “The Covid-19 pandemic created new challenges that were unfortunately too big to overcome.”
“Leading what has become Nat Sherman International’s final chapter these last nine years has been the honor of a lifetime,” said Michael Herklots, vice president of Nat Sherman International. “Hopefully, our premium cigars will live on in the humidors of our greatest fans and be appreciated with fond memories for many years to come.”
Nat Sherman International includes the retail store as well as the wholesale premium cigar and pipe company. The cigarette portfolio is handled by a different Altria division and is not affected by the closure.
August 6, 2020
Bhutan to Tolerate Tobacco Sales

Photo: Taco Tuinstra
The decision by Bhutan’s government to allow the opening of tobacco sale outlets in the country is consistent with the nation’s Tobacco Control Act and constitution, according to the Office of the Attorney General (OAG).

While the Tobacco Control Act of 2010 restricts the domestic sale and purchase of tobacco products, it allows individuals to import tobacco for personal consumption.

Because of the coronavirus crisis, however, Bhutan has closed official border crossings, boosting illegal imports. By allowing limited domestic sales, the government hopes to crack down on smuggling.

Responding to critics who questioned the legality of the measure, the OAG said the extraordinary situation brought about by the coronavirus crisis justified the measure. However, the office insisted that the domestic sales outlets could be tolerated only for the duration of the pandemic.
Bhutan banned tobacco sales in December 2004. Soon after, Tobacco Reporter visited the Himalayan kingdom to report from the world’s first officially smoke-free nation.
August 6, 2020
Universal Reports ‘Respectable’ Quarter

George C. Freeman III
Universal Corp. reported net income of $7.3 million for the first quarter of fiscal year 2021, which ended on June 30, 2020. Those results were up from $2.1 million in the first quarter of fiscal year 2020.

Excluding certain nonrecurring items, net income declined by $4.3 million for the quarter ended June 30, 2020, compared to the quarter ended June 30, 2019. Operating income of $8.5 million for the quarter increased by $1 million over the previous year’s quarter.

Segment operating income was $4.3 million for the first quarter of fiscal year 2021, down $3.2 million compared to the same period last fiscal year, mainly because of earnings declines in Universal’s Other Regions and Other Tobacco Operations segments.
“Our fiscal year 2021 is off to a slow but respectable start as nearly all of our origins continue to make good progress moving through their various tobacco growing and processing activities. The first fiscal quarter is generally the weakest of our fiscal year given seasonal timing,” said George C. Freeman III, chairman, president and CEO of Universal.

“This fiscal year, as a result of the Covid-19 pandemic, we are also experiencing later openings of the tobacco buying seasons and slower processing due to social distancing and other local government safety requirements,” Freeman added. “We have also had some slower receipts of customer shipping instructions and orders. However, to date, we have not seen a material impact to our supply chain or seasonal planting or harvesting requirements.”

August 6, 2020
Juul Takes Legal Action Against Resellers

Photo: Juul Labs
Juul Labs and its Canadian affiliate, Juul Labs Canada, have filed litigation against a global network of entities and individuals that illegally sourced and resold authentic Juul pods and devices worldwide.
Among the main targets of its legal action are the purveyors of the PodVapes and PodMaster websites, entities based in Canada that acquired Juul products from the U.K., Canada and the U.S. to ship all over the world.
PodVapes, for example, acquired authentic Juul pods from Canada and the U.K. in nontobacco and nonmenthol flavors and shipped them into various states in the U.S. to be illegally resold, according to Juul Labs.
“Through investigations, we have confirmed that PodVapes actively sells diverted Juul pod packs into the U.S.,” Juul Labs wrote in a statement. “PodVapes also shipped Juul devices that were explicitly developed for non-U.S. markets into the U.S. in violation of FDA laws and regulations.”
Juul Labs says evidence of this illicit activity first started to emerge in February 2019. While sales of diverted products were first noticed in the markets of New Zealand and Australia by websites facing those countries, the sales quickly spread to websites facing the U.K. and U.S. and, most recently, Canada.
“As Juul Labs continues to reset the category, it is imperative that the company acts as a responsible partner to regulators and other stakeholders around the world, wherever our products are sold,” Juul Labs stated. “We are committed to aggressively going after bad actors in the vapor category and helping to ensure a responsible marketplace for adult smokers seeking legal alternatives to combustible cigarettes.”
August 6, 2020
Meldrum to Succeed Oberlander at RAI

Guy Meldrum (Photo: BAT)
Ricardo Oberlander
Ricardo Oberlander will step down as president of Reynolds American Inc. (RAI) and from the management board on Aug. 31, 2020. He will leave the BAT group at the end of the year. Oberlander has been with the group for almost three decades, over seven years of which as a member of the management board, firstly as regional director of the Americas and then latterly leading Reynolds American. Oberlander steps down to pursue other opportunities.
Guy Meldrum, currently regional director of Asia-Pacific and Middle East, will succeed Oberlander as president of Reynolds American effective Sept. 1, 2020.
Michael (Mihovil) Dijanosic, currently area director of Asia-Pacific, will be appointed regional director of Asia-Pacific and Middle East, replacing Meldrum.
“I am grateful for the drive and leadership that Ricardo has brought to the group throughout his career and for leaving the Reynolds American business in such robust shape,” said BAT Chief Executive Jack Bowles. “I would like to thank Ricardo for his significant contribution over the last three decades, including over seven years as a member of the management board. We all wish him the very best for the future.
“Guy’s extensive experience with BAT over the last 26 years, including a number of senior roles in Australasia, the North Asia Area, Russia and his recent experience in leading the Asia-Pacific and Middle East Region, will serve him well to further drive the transformation of Reynolds American.
“I am delighted to welcome Michael, who has over two decades of experience with the group, to the management board. He has held a number of senior leadership roles in Asia-Pacific across different markets and has been a member of the regional leadership team since 2012. This in-depth knowledge of the region positions him extremely well to succeed Guy.”
August 5, 2020
State Flavor Ban Drives Users Elsewhere

Photo: Miriam Doerr | Dreamstime.com
Massachusetts’ ban on the sale of flavored tobacco products has shifted rather than reduced tobacco consumption, according to Ulrik Boesen, senior policy analyst with the Center for State Tax Policy at the Tax Foundation.

On June 1, Massachusetts’ ban on the sale of flavored tobacco products, including menthol cigarettes, took effect. At first sight, early data suggests a public health success: sales of cigarette tax stamps in the Bay State have declined 9.2 percent in the first half of 2020 compared to the same months last year.

However, sales of tax stamps in the Northeast region (Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island and Vermont) have remained stable in the first half of 2020, suggesting Massachusetts consumers are now buying their tobacco products in neighboring states.

From Jan. 1, 2020, to June 30, 2020, 311,848,000 stamps were sold in the region. For the same period in 2019, that number was 311,974,000. For June alone, sales actually increased from 53,877,000 in 2019 to 63,449,000 in 2020.

Tobacco tax collections, too, have shifted elsewhere, according to Boesen. In December last year, the Massachusetts Department of Revenue estimated the ban would decrease collections by $93 million in 2021. That revenue is now being collected by Massachusetts neighbors.

“It is not in the interest of Massachusetts to pursue a public health measure that merely sends tax revenue to their neighboring states without improving public health,” writes Boesen. “In addition, the ban on flavored tobacco highlights the complications of contradictory tax and regulatory policy, the instability of excise taxes that go beyond pricing in the cost of externalities, and the public risks of driving consumers into the black market through excessive taxation or regulation.”
August 5, 2020
Zimbabwe: Output Expected to Stay Firm

Photo: Taco Tuinstra
The Zimbabwean tobacco industry expects leaf production to hold up despite the Covid-19-related restrictions on movement and a ban on cigarette sales in neighboring South Africa, reports The Herald.
“I don’t foresee any marked change, which would lead to a reduction in the production of tobacco in Zimbabwe,” Paul Zakariya, director of the Zimbabwe Farmers Union, was quoted as saying.
“Covid-19 is just one among other major factors that may affect production,” he added, pointing to other challenges such as the rising cost of inputs.
Tobacco farmers and tobacco auctions were exempted from Zimbabwe’s lockdown and curfew regulations. To limit large gatherings of people, smaller deliveries of leaf were combined into larger ones for transport to the sales floors. And instead of attending the sales process in person, groups of farmers sent representatives. (Also see our June 2020 feature story “Silent Auction”).
The global tobacco market will reach $66,42 billion (in retail prices), increasing at an average of 2.6 percent a year between 2019 to 2024, according to a recent report published by Research and Markets.
Despite a drought in the 2018-2019 cropping season, Zimbabwe still managed to produce a record-breaking tobacco output, reaching an all-time high of 258 million kg.
In the current marketing season, farmers have so far sold 159 million kilograms of tobacco worth $390 million as trading reaches its peak under the World Health Organization Covid-19 health guidelines.
The Tobacco Industry and Marketing Board expects farmers to produce about 224 million kg of tobacco are expected this season, down from the previous year’s output level of 259.5 million kilograms owing largely to drought.
August 4, 2020